Guiding consumers since 2009

What does the rate cut mean for your homeloan?

By Staff Writer

The latest cut by the Reserve Bank in the interest rate by 50 basis points or 0.5% was announced on Thursday the 13th of August 2009. As a policy of inflation targeting is followed by the Reserve Bank interest rates had gone sky high to get inflation under control. It now appears that it is. So the interest rate was dropped just a tad. This will have an effect on how much you pay on your homeloan every month and is a welcome relief in the recession. So what will the effects be on your 20 year homeloan?

 

  • Half a million Rand homeloan = R 106.04 savings per month
  • One million Rand homeloan = R 338.08 savings per month
  • Two Million Rand homeloan = R 676.17 savings per month

 

These are welcome figures and while the amounts saved are not that large they do come as a bit of respite in the face of the slowing economy. There is less money around that last year and the money we do have is getting tighter. So every little bit helps you. There are two ways to look at the savings, the first is that it leaves more money in your pocket and everybody likes a bit more money in your pocket. The other way to look at it is in terms of paying off the capital on your homeloan quicker. If you pay above what you are required that goes to servicing the capital rather than the interest.

So if you don't actually pay less for your homeloan each month and instead keep paying the same as before the rate cut you can pay capital off on your homeloan quicker. In fact on the Half a million Rand homeloan over a year you would pay off R 2020.48 on capital, on the million Rand homeloan you would pay off R 4056.96 and on the two million Rand homeloan you would pay off R 8114.04 over the course of a year by just paying your bond off at what you were paying last month. These savings add up to real value especially if you consider that a homeloan is a long term investment and needs to be viewed with a long term outlook. So put your savings into your capital and be in a better position come the recovery.

Recent Articles

Featured It’s possible to change your marriage regime

Many people wed before they sign an antenuptial contract (ANC). This is especially practiced by people in customary marriages and those not clued up about the ANC. The law says if there’s no ANC before the wedding takes place, the marriage will automatically be in Community of Property. 

Keep this in mind when taking out new financial products

Adding a product to your personal finance portfolio, such as insurance or an investment, is a big decision. We found out what you should keep in mind before taking out a new product, how you can assess the products you already have, and how you can generally improve your financial position.

Are you in debt denial?

With debt levels increasing at 13% more than income levels, South Africans are more debt-stressed now than arguably ever before. This is iterated by the National Credit Regulator’s (NCR) report that nearly half of credit-active consumers in South Africa have damaged credit records. However, only a few seek the necessary help.

Why should you invest in a mutual bank?

Often when people think about banking, they always think about commercial banks. Mutual banks hardly come to mind, but these banks offer investment opportunities that are often overlooked.

 

Deals

Aurora Spa 100-minute Treatment Special

Price: R449
When: Until 31 March
Where: Century City

Woodstock Grill and Tap Steak Thursdays

Price: R100
When: Thursdays
Where: Woodstock

KFC 5+5 Special

Price: R65
When: Until 25 February 2020
Where: Nationwide